| Many small-to-medium size pharmaceutical | | | | regulatory management, and clinical trials. |
| companies, whether they may be manufacturers | | | | Funding such a program can be accomplished in a |
| or distributors, or both, are beginning to see, or | | | | number of ways. For example, many small |
| are projecting for the near term, an erosion of | | | | pharmaceutical companies are able to fund the |
| their sales and/or profits. Many of these | | | | development from their current cash flow. This |
| companies currently manufacture and/or sell DESI | | | | can be more easily accomplished than appears at |
| and ANDA products where sales and profits can | | | | first glance. That is, because the development |
| be highly threatened due to market conditions and | | | | program stretches over a period of 1.5 – 2.0 |
| new FDA regulatory procedures. The question | | | | years, and because the costs of the program are |
| now for many companies is how do I maintain | | | | spread over the period of development, |
| and grow my sales and profits for the next 5 to | | | | payments for development are made in smaller |
| 10 year period? As discussed in previous RRI | | | | increments and spaced over time according to |
| newsletters, the answer for many is the | | | | developmental milestones. Other means to |
| realization that the 505(b)(2) strategy is the best | | | | decrease the costs of development include |
| plan. | | | | partnering with other pharmaceutical companies to |
| Once the realization has been made to start a | | | | share the costs. Partnering can be in many |
| 505(b)(2), the next questions are how do I | | | | different forms, such as shared distribution rights, |
| proceed, what are the costs, and how do I | | | | or partnering with a contract manufacturer to |
| finance this new venture? Those companies | | | | eliminate the formulation and production costs in |
| beginning their first 505(b)(2) often choose to | | | | exchange for a percentage of sales. Borrowing is |
| start with a relatively simple and inexpensive | | | | always an option, and borrowing can be in the |
| development program. Such a program may | | | | form of creative financing where no equity is lost |
| include the development of a drug that combines | | | | and the lender shares in the risk of development |
| two previously approved drugs into one tablet, | | | | by not asking for a guaranteed payment, but |
| where the formulation of the new drug is simple | | | | instead asks for milestone payments associated |
| and the studies required for FDA approval will | | | | with sales (companies such as Paul Capital |
| involve only simple and inexpensive bioequivalance | | | | Healthcare of San Francisco offer these types of |
| (PK) studies. In this way, high development costs | | | | innovative financing opportunities). In this way, the |
| associated with difficult formulations, and the | | | | sponsoring company can avoid payments if the |
| relatively higher costs of clinical endpoint studies | | | | development program in some way fails |
| can be avoided. Thus, the costs for such an entry | | | | expectations, but shares the rewards as the |
| level 505(b)(2) development program are often | | | | product goes to market and succeeds in sales |
| less than $1.5 million total for all phases of the | | | | goals. |
| program including formulation, manufacturing, | | | | |